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LIQUIDITY FINANCIAL ADVISORS, INC.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
November 21, 1996
Krescent Partners L.L.C.
1301 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Mr. W. Xxxxxx Xxxxxxx
Gentlemen:
When signed by Liquidity Financial Advisors, Inc. ("Advisor")
and countersigned by Krescent Partners L.L.C. (the "Bidder") this letter shall
constitute an agreement with respect to the Bidder's engagement of the Advisor
to act as its financial advisor in connection with its proposed acquisition of
units of investor limited partnership interests in Xxxxx Realty Fund, Ltd.-III,
a Massachusetts limited partnership (the "Partnership").
1. CERTAIN DEFINITIONS. Capitalized words and phrases used in this
letter agreement have the following meanings:
a. "Acquisition" means, directly or indirectly, through one
transaction or a series of transactions, (1) the acquisition
of record and beneficial ownership of more than 1% of the
outstanding limited partnership interests in the Partnership
by the Bidder and/or one of its Affiliates by means of a
merger, consolidation, reorganization or other business
combination pursuant to which the Bidder and/or one of its
Affiliates is merged or otherwise combined with the
Partnership; (2) the acquisition by the Bidder and/or one of
its Affiliates by assignment of an economic interest
consisting of, or of record and beneficial ownership of, more
than 1% of the outstanding limited partnership interests in
the Partnership by means of a tender or exchange offer,
negotiated purchase or otherwise; or (3) the acquisition by
the Bidder and/or one of its Affiliates of title to, or
control over, all or substantially all of the assets of the
Partnership.
b. "Acquisition Equity" with respect to a Person means the amount
of such Person's equity capital invested in an Acquisition
Transaction or Affiliate Acquisition Transaction as of the
ninetieth day after the consummation of such Acquisition
Transaction or Affiliate Acquisition Transaction.
c. "Acquisition Fee" shall have the meaning set forth in
paragraph 4(a).
d. "Acquisition Transaction" means the proposed Acquisition by
the Bidder of the Units.
e. "Advisor" means Liquidity Financial Advisors, Inc., a
California corporation.
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f. "Affiliate" with respect to any Person has the meaning set
forth in Rule 12b-2 promulgated under the Securities Exchange
Act of 1934, as amended.
g. "Affiliate Acquisition Transaction" means the Acquisition
Transaction and any Acquisition by an Affiliate of the Bidder
of limited partnership interests in a real estate limited
partnership in connection with which the Advisor was engaged
to act as financial advisor for such Affiliate.
h. "Anticipated Acquisition Equity" shall have the meaning set
forth in paragraph 4(b).
i. "Apollo Affiliate Investors" means AP-GP Prom Partners, Inc.,
Apollo Real Estate Investment Fund II, L.P. and any of their
Affiliates that invest in an Affiliate Acquisition
Transaction.
j. "Associate" with respect to any Person has the meaning set
forth in Rule 12b-2 promulgated under the Securities Exchange
Act of 1934, as amended.
k. "Bidder" means Krescent Partners L.L.C., a Delaware limited
liability company.
l. "Business Day" means a day other than a Saturday, a Sunday or
a day on which banking institutions in the City of New York
are authorized or obligated by law or executive order to
close.
m. "Cash Flow Fee" shall have the meaning set forth in paragraph
5(a).
n. "Indemnified Party" shall have the meaning set forth in
paragraphs 7(a) and (b).
o. "Invested Capital" with respect to any Person means the
amounts contributed from time to time by such Person to the
capital of another Person.
p. "LF Partnership" shall have the meaning set forth in paragraph
7.
q. "Partnership" means Xxxxx Realty Limited Partnership-III, a
Massachusetts limited partnership.
r. "Person" means an individual, a corporation, a partnership, a
joint venture, a limited liability company, a trust, or any
other entity.
s. "Term" shall have the meaning set forth in paragraph 2(a).
t. "Units" means units of investor limited partnership interests
in the Partnership, including depositary units.
2. TERM; SERVICES.
a. The term ("Term") of the engagement by the Bidder of the
Advisor hereunder shall be two years beginning on the date of
this letter agreement. During the
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Term, the Advisor will assist the Bidder on an exclusive basis
in analyzing, structuring, negotiating and effecting the
Acquisition Transaction on the terms and conditions set forth
in this letter agreement. In this connection, during the
Term, exclusively on the Bidder's behalf, the Advisor will, as
requested by the Bidder:
i. perform financial analysis of the Partnership in the
context of the Acquisition Transaction;
ii. assist the Bidder in its determination of the
appropriate price to be paid in the Acquisition
Transaction for the Units;
iii. advise the Bidder as to the structure and form of the
Acquisition Transaction;
iv. furnish the Bidder with such publicly-available due
diligence material as may reasonably be requested by
the Bidder;
v. furnish the Bidder with a current list of the limited
partners of the Partnership (or holders of Units) and
their addresses; and
vi. render such other financial advisory services as may
from time to time be reasonably requested by the
Bidder in connection with the Acquisition
Transaction.
b. The Advisor represents and warrants that neither it nor its
Affiliates or Associates have furnished to any Person except
the Bidder, and covenants and agrees that during the Term it
will not, and will cause its Affiliates and Associates not to
furnish, to any Person (other than counsel for the Advisor)
(i) the due diligence materials provided to the Bidder
hereunder, (ii) any list of the limited partners of the
Partnership (or holders of Units) or (iii) any financial
analysis of the Partnership prepared for the Bidder, unless
(I) it has first (A) furnished the Bidder with a written
notice setting forth its intention to do so, the identity of
each intended recipient of such material and a description of
any proposed or contemplated Acquisition or other transaction
involving such recipients and (B) offered the Bidder the
exclusive opportunity to engage the Advisor in connection with
such Acquisition or other transaction, (II) the Bidder has
failed to so engage the Advisor within 10 Business Days after
receipt of such written notice and (III) the Bidder has
consented in writing to the proposed action of the Advisor,
which consent shall not unreasonably be withheld; provided,
however, that the Advisor will not, and will cause its
Affiliates and Associates not to, disclose to any Person in
violation of any agreement between the Advisor or any
Affiliate or Associate of the Advisor and the Partnership or a
general partner of the Partnership any list of the limited
partners of the Partnership (or holders of Units) or take any
other action in violation of any such agreement.
c. The Advisor (i) represents and warrants that it has heretofore
disclosed in writing to the Bidder the identity of any Person
that holds or has a beneficial interest in
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Units for whom the Advisor or its Affiliates serve as general
partners or advisors or to whom the Advisor or its Affiliates
owe any fiduciary duty or other obligation and (ii) covenants
and agrees that during the Term it will not serve as a general
partner or advisor for such a Person (other than a Person
specified in (i) above) or advise or otherwise assist any
Person (other than a Person specified in (i) above or the
Bidder) in acquiring a beneficial interest in Units, unless
(I) the Advisor has first (A) furnished the Bidder with a
written notice setting forth its intention to do so, the
identity of each Person involved and a description of any
proposed or contemplated Acquisition or other transaction
involving such Persons and the Units or the Partnership and
(B) offered the Bidder the exclusive opportunity to engage the
Advisor in connection with such Acquisition or other
transaction, (II) the Bidder has failed to so engage the
Advisor within 10 Business Days after receipt of such written
notice and (III) the Bidder has consented in writing to the
proposed action of the Advisor, which consent shall not
unreasonably be withheld.
d. The Advisor covenants and agrees that without the written
consent of the Bidder it will not, and will cause its
Affiliates and Associates not to, request any additional or
updated list of investors in the Partnership or any of its
Affiliates.
3. EXPENSE REIMBURSEMENT. The Bidder will reimburse the Advisor for its
reasonable actual out-of-pocket expenses incurred in connection with
the Acquisition Transaction upon submission of substantiating
documentation.
4. ACQUISITION FEE.
a. If, during the Term, an Acquisition Transaction is
consummated, the Bidder agrees to pay Advisor an acquisition
fee ("Acquisition Fee") calculated as follows:
i. 2.0 percent of the Acquisition Equity of the Bidder
in such Acquisition Transaction until the aggregate
Acquisition Equity of the Bidder and/or its
Affiliates in all Affiliate Acquisition Transactions
theretofore consummated together with the Acquisition
Equity of the Bidder in the Acquisition Transaction
itself equals $15,000,000; then
ii. 1.0 percent of the Acquisition Equity of the Bidder
in such Acquisition Transaction until the aggregate
Acquisition Equity of the Bidder and/or its
Affiliates in all Affiliate Acquisition Transactions
theretofore consummated together with the Acquisition
Equity of the Bidder in the Acquisition Transaction
itself equals $45,000,000; then
iii. 0.5 percent of the Acquisition Equity of the Bidder
in such Acquisition Transaction until the aggregate
Acquisition Equity of the Bidder and/or its
Affiliates in all Affiliate Acquisition Transactions
theretofore consummated together with the Acquisition
Equity of the Bidder in the Acquisition Transaction
itself equals $70,000,000; and then
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iv. 0.25 percent of the Acquisition Equity of the Bidder
in such Acquisition Transaction after the aggregate
Acquisition Equity of the Bidder and/or its
Affiliates in all Affiliate Acquisition Transactions
theretofore consummated together with the Acquisition
Equity of the Bidder in the Acquisition Transaction
itself exceeds $70,000,000.
b. At or prior to the closing of the Acquisition Transaction, the
Bidder will notify the Advisor in writing of the amount of the
Bidder's anticipated Acquisition Equity (the "Anticipated
Acquisition Equity") in such Acquisition Transaction as of the
ninetieth date after such closing and at closing the Bidder
will pay to the Advisor an Acquisition Fee based on the amount
of such Anticipated Acquisition Equity. Within 10 days after
the ninetieth day following the closing of such Acquisition
Transaction, a final determination of the Bidder's Acquisition
Equity in such Acquisition Transaction as of the ninetieth day
after the closing date of the Acquisition Transaction will be
made the Bidder and the Advisor. Within 10 days after such
determination, the Bidder will pay to the Advisor any
additional amount of the Acquisition Fee determined to be due
or the Advisor will repay to the Bidder any amount of the
Acquisition Fee determined to have been overpaid.
5. CASH FLOW FEE.
a. In addition to the fee payable pursuant to paragraph 4, the
Bidder will pay the Advisor a fee (the "Cash Flow Fee") based
upon the aggregate cash distributions of the Bidder in
connection with the Acquisition Transaction and the Bidder's
Affiliates in connection with all Affiliate Acquisition
Transactions, calculated and payable as follows:
i. 100 percent to members of the Bidder and its
Affiliates until such time as the Apollo Affiliate
Investors have received cash distributions in an
amount equal to their aggregate Invested Capital plus
a cumulative return of 15 percent per annum
compounded quarterly on their unreturned Invested
Capital; then
ii. 95 percent to members of the Bidder and its
Affiliates and 5 percent to the Advisor until such
time as the Apollo Affiliate Investors have received
cash distributions in an amount equal to their
aggregate Invested Capital plus a cumulative return
of 20 percent per annum compounded quarterly on their
unreturned Invested Capital; and then
iii. 90 percent to members of the Bidder and its
Affiliates and 10 percent to the Advisor.
b. The Advisor covenants and agrees that its interest in the Cash
Flow Fee will not be assigned, pledged, hypothecated or
otherwise transferred to any Person other than its Affiliates.
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6. REPRESENTATIONS, WARRANTIES AND COVENANTS.
a. The Advisor hereby represents and warrants to, and covenants
with, the Bidder as follows:
i. the execution and delivery of, and the performance by
the Advisor of its obligations under, this letter
agreement have been duly and validly authorized by
the Advisor, and this letter agreement has been duly
executed and delivered by the Advisor;
ii. the Advisor is duly registered as an investment
adviser under the Investment Advisers Act of 1940, as
amended;
iii. the Advisor does not possess any non-public
information with respect to the operations, assets,
liabilities, financial condition or prospects of the
Partnership;
iv. the Advisor, together with its Affiliates and
Associates, is the beneficial owner of 1,128 Units
and, except as contemplated hereunder or in the
option agreement dated November 21, 1996 between
Liquidity Financial Group, L.P. and Apollo Real
Estate Investment Fund II, L.P., covenants and agrees
that it will not, and will cause its Affiliates and
Associates not to, acquire, directly or indirectly, a
beneficial interest in any additional Units;
v. the Advisor is not in breach of any covenant or
agreement with the Partnership and will not be in
breach of any covenant or agreement with the
Partnership;
vi. neither the execution, delivery or performance of
this letter agreement by the Advisor, the offer by
the Bidder to acquire the Units nor the consummation
by the Bidder of the Acquisition Transaction
conflicts or will conflict with or constitutes or
will constitute a breach of, or a default under, any
agreement or other instrument to which the Advisor or
any Affiliate or Associate of the Advisor is a party
or by which any of them may be bound; and
vii. the information supplied or to be supplied by the
Advisor to the Bidder for inclusion in the Schedule
14D-1 to be filed by the Bidder in connection with
the Acquisition Transaction, the material to be filed
as exhibits thereto and any amendments thereto does
not and will not, to the Advisor's knowledge after
due inquiry, contain any untrue statement of a
material fact or omit to state any material fact
required to be stated therein or necessary in order
to make the statements made therein, in light of the
circumstances under which they were made, not
misleading.
b. The Bidder hereby represents and warrants to the Advisor as
follows:
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i. the execution and delivery of, and the performance by
the Bidder of its obligations under, this letter
agreement have been duly and validly authorized by
the Bidder and this letter agreement has been duly
executed and delivered by the Bidder;
ii. neither the execution, delivery or performance of
this letter agreement by the Advisor, the offer by
the Bidder to acquire the Units nor the consummation
by the Bidder of the Acquisition Transaction
conflicts or will conflict with or constitutes or
will constitute a breach of, or a default under, any
agreement or other instrument to which the Bidder or
any Affiliate or Associate of the Bidder is a party
or by which any of them may be bound;
iii. the Bidder is not in breach of any covenant or
agreement with the Partnership and will not be in
breach of any covenant or agreement with the
Partnership.
7. OTHER RELATIONSHIPS. The Bidder understands and acknowledges that to
the extent disclosed pursuant to paragraph 2(c) Advisor and/or its
Affiliates serve as general partners or advisors to Partnerships ("LF
Partnerships") that own Units and, accordingly, that Advisor and/or
its Affiliates have fiduciary or other obligations to the LF
Partnerships, limited partners in the LF Partnerships, and, depending
on the circumstances, the Partnership and other holders or beneficial
owners of the Units. Notwithstanding any provision of this letter
agreement to the contrary, the Bidder understands and agrees that, in
providing services to the Bidder hereunder, Advisor will not be
obligated to render any advice or assistance or provide any
information that Advisor believes would be inconsistent with its
obligations to these other Persons. Advisor may disclose to the LF
Partnerships and their limited partners information concerning this
letter agreement and the terms of the transactions contemplated hereby
to the extent Advisor believes the disclosure of such information is
necessary to satisfy its obligations to the LF Partnerships and their
limited partners.
8. INDEMNIFICATION.
a. The Bidder agrees to indemnify the Advisor and its Affiliates
and their respective partners, directors, officers, employees,
agents and controlling persons (each such person being an
"Indemnified Party") from and against any and all losses,
claims, damages and liabilities, joint or several, to which
such Indemnified Party may become subject under any applicable
federal or state law, or otherwise related to or arising out
of (i) the breach by the Bidder of any representation,
warranty or covenant made by the Bidder in this letter
agreement, (ii) the Acquisition Transaction or (iii) the
engagement of the Advisor pursuant to, and the performance by
the Advisor of the services contemplated by, this letter
agreement and will reimburse any Indemnified Party for all
reasonable expenses (including reasonable fees and expenses of
legal counsel) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or
threatened claim or any action or proceeding arising
therefrom, whether or not such Indemnified Party is a party.
The Bidder will not be liable under the
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preceding sentence to the extent that any loss, claim, damage,
liability or expense relates to (i) a breach of any
representation or warranty made by the Advisor in this letter
agreement or (ii) the Advisor's bad faith, gross negligence or
willful misconduct in the performance by the Advisor of the
services contemplated by this letter agreement
b. The Advisor agrees to indemnify the Bidder, its members and
their respective Affiliates, partners, directors, officers,
employees, agents and controlling persons (each such person
being an "Indemnified Party") from and against any and all
losses, claims, damages and liabilities, joint or several, to
which such Indemnified Party may become subject under any
applicable federal or state law, or otherwise related to or
arising out of (i) the breach by the Advisor of any
representation, warranty or covenant made by the Advisor in
this letter agreement, (ii) the breach by the Advisor of any
representation, warranty or covenant made by the Advisor or
any Affiliate or Associate of the Advisor in any agreement
with the Partnership or any general partner of the Partnership
or (iii) the Advisor's bad faith, gross negligence or willful
misconduct in the performance by the Advisor of the services
contemplated by this letter agreement and will reimburse any
Indemnified Party for reasonable expenses (including
reasonable fees and expenses of legal counsel) as they are
incurred in connection with the investigation of, preparation
for or defense of any pending or threatened claim or any
action or proceeding arising therefrom, whether or not such
Indemnified Party is a party.
9. INDEPENDENT CONTRACTORS; NO JOINT VENTURE. The parties acknowledge
and agree that the relationship between the Advisor and the Bidder is
that of independent contractors. Nothing in this letter agreement is
intended to create or shall be deemed to create or constitute a joint
venture or partnership between the Advisor and the Bidder.
10. ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. Neither party may assign
this letter agreement without the prior written consent of the other
party, and any purported assignment in violation of this provision
will be void. The terms and provisions of this letter agreement are
solely for the benefit of the parties hereto and other Indemnified
Parties and their respective successors, permitted assigns, heirs and
personal representatives, and no other person will acquire or have any
right by virtue of this letter agreement.
11. TERMINATION. This letter agreement shall terminate on the later of
March 1, 1997 and the fifteenth day after either party has given
written notice to the other of the termination thereof. The
provisions of this letter agreement relating to the payment of fees
and indemnification as well as the provisions of paragraphs 2(b),
2(c), 6(a)(iv), 6(a)(v) and 6(b)(iii) will survive the termination of
this letter agreement.
12. NOTICES. All notices or other communications required or permitted
hereunder shall be sufficient if it is in writing and delivered by
hand or sent by prepaid telex, cable or telecopier or sent, postage
prepaid, by registered, certified or express mail, or by recognized
overnight air courier service and shall be deemed given when so
delivered by hand, telex, cable or telecopy or if mailed or sent by
overnight courier service, on the
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fifth business day after mailing (one business day in the case of
express mail or overnight courier service) to the parties at the
following addresses:
a. If to the Bidder, to:
c/o AP-GP Prom Partners Inc.
Apollo Real Estate Advisors II, L.P. 1301 Avenue of
the Xxxxxxxx 00xx Xxxxx Xxx Xxxx, Xxx Xxxx 00000
Attention: W. Xxxxxx Xxxxxxx Telecopy: (000) 000-0000
and:
c/o AP-GP Prom Partners Inc.
c/o Apollo Real Estate Advisors II, L.P. 1999 Avenue
of the Stars Xxxxx 0000 Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx Telecopy: (000) 000-0000
with a copy to:
Battle Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx
Telecopy: (000) 000-0000
b. If to the Advisor to:
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx
Telecopy: (000) 000-0000
13. PARAGRAPH HEADINGS. The paragraph headings contained in this letter
agreement are inserted for reference purposes only and shall not
affect the meaning or interpretation hereof.
14. GOVERNING LAW. This letter agreement shall be governed by, and
construed in accordance with, the laws of the State of New York
without regard to conflict of law principles.
15. WAIVERS. The waiver by any party of the breach of any of the terms
and conditions of, or any right under, this letter agreement shall not
be deemed to constitute the waiver of
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any other breach of the same or any other term or condition or of any
similar right. No such waiver shall be binding or effective unless
expressed in writing and signed by the party giving such waiver.
16. COUNTERPARTS. This letter agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
17. ENTIRE AGREEMENT. This letter agreement contains, and is intended as,
a complete statement of all of the terms of the arrangements among the
parties with respect to the matters provided for herein and supersedes
any previous agreements and understandings between the parties with
respect to those matters. No amendment or modification of the terms
of this letter agreement shall be binding or effective unless
expressed in writing and signed by each party.
Please confirm that the foregoing correctly sets forth our
agreement by signing and returning to us the enclosed duplicate copy of this
letter agreement.
Very truly yours,
LIQUIDITY FINANCIAL ADVISORS, INC.
By: /s/ Xxxxx Xxxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: President
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST WRITTEN ABOVE:
KRESCENT PARTNERS L.L.C.
By: AP-GP PROM PARTNERS, INC.,
its Managing Member
By: /s/ Xxxxxxx Xxxx
-------------------------------------------------
Name: Xxxxxxx Xxxx
Title: Vice President
